Don't be scared of Sky

Now's the time to ground the high-flyer

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Comment Wherever you go and whoever you talk to in any of the media, telecoms and television industries, people are absolutely terrified of Sky. Not just scared, absolutely terrified. Not that they'd ever admit it, of course.

The fear of Murdoch extends further than you'd think was possible for an old man, and no company inspires wobbling and trembling in both start-ups, SMEs and venture capitalists alike like Sky does. It is one of the only two companies that the incumbent colossus, BT, fears - the other being Microsoft. Even Bill Gates' merry little band of nerds are hesitant to trifle with Isleworth's finest. The saying goes: "When you throw stones at Sky, they bomb your village". So in the spirit of James Murdoch's recent catchy metaphorical slogan-fest, why throw stones when you can carpet bomb?

No-one can doubt News Corp's power - politicians court the old man's favour as his readership decides who either stays or enters into the corridors of Whitehall. If not the devil incarnate, he's the archetypal power-broker that lives in the secret back room that's always filled with cigar smoke. The $46bn dollar global empire stretches from Australian newspapers to LA movie studios, US television networks, bookstores, Israeli technology and, of course, our own beloved print stables. In the UK, News International controls The Sun, The Times, The Sunday Times and the News Of The World.

A fiery satellite

The bullish culture originally debuted in the 80s through mass sackings, and that that has come to define many of these companies causes trepidation for those with the thickest of skins. It's rare you will ever find anyone who is enthusiastic about going into a meeting with Sky, nor anyone who had a smile on their face afterwards. These people even bully movie studios, hate the BBC, scorn their own shareholders and refuse to pay tax anywhere they operate. You can guarantee that if you decide to compete, or fall out of favour, it will be reflected in the press the next day.

They say you can't do consumer business in the UK without a brand - the British public is obsessed with them, and they are the de-facto standard if you want credibility or trust for your products and services. Sky's brand over-shadows almost everyone else you can think of, as it is simply one of the most powerful in this country, if not the world. Nobody gets Sky from Dixons in the High Street for the cool satellite reception equipment - they get it for the football. I've heard Sky called "Chav TV" more times than I care to remember ("Birds, Beer and Footie"), and many of those times were just from talking to regulars on the Osterley shuttle.

So if it really is Chav TV, then Sky has managed to find a lot of chavs, and a lot of rural farming types - just over 8m at last count, and if James Murdoch has his way, its army of subscribers will swell by 25 percent again to top 10m within a few years. Sky controls almost a third of the UK TV audience. And most people, regardless of their knowledge of the TV industry as a whole, will be able to tell you how it's done it - by monopolising Premiership football, weaponising its encryption system, cross-promoting in its news media, and block-booking pay TV movies.

Sun Tzu argued that to have victory in a hundred battles, you must know yourself, but also know your enemy. And all this robotic preparation for prostrating in front of the mighty Murdoch altar is making the wolf a lot bigger than he is. If Larry Page and Sergey Brin had decided just to pack it all in because Alta Vista and Yahoo were just too established in the search market, we wouldn't have Google today (and it has a market capitalisation more than 10 times that of BSkyB to prove it). Holding Sky up to the absurd level it is at now in the eyes of potential IPTV operators is the equivalent of doing just that. Sky is very good at what it does, but it does not have a divine right to rule the UK television market, nor does it control the greater market forces, as much as it'd like to.

First and foremost, no matter how hard market research companies protest, the UK is a country that is used to getting its TV entirely free (well, at the cost of a licence that applies for any or all platforms) and is very unlikely to ever become a true pay TV market any time soon. Our TV has always been free to receive, free to view and free to interact with. Sky's pay TV model is fundamentally incompatible with British culture, which is why it spends a considerable amount of time trying to erode the case for a licence fee-funded BBC. It also explains the failure of ITV Digital and the success of Freeview - the same people who love pay-as-you-go see the inherent value of a one-off set-top box purchase. It's the way we've been doing it for years, and it's the way most people are most familiar with. Due to this incontrovertible historical precedent, Sky is always having to swim against the tide - it's very, very difficult to compete with free.